Select Page

Chapter 6 15e Note: Use your text and provided resources!
See Problem details beginning page 259

Instructions: Complete worksheet, do not respond to questions unless instructed to do so. Everything in this worksheet relates directly to Problems and Exercises at the end of the chapter in the assigned text.

Enter a formula into each of the shaded cells below

Exercise 6-1: 1, and 2 (p. 262-263)
See data provided on p. 262

1. Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs.

Direct materials Rp100
Direct labor \$320
Absorption costing unit product cost \$700 Correct

2. Under variable costing, only the variable manufacturing costs are included in product costs.

Direct materials \$100
Direct labor \$320
Variable costing unit product cost \$460 Correct

Note that selling and administrative expenses are not treated as product costs under either absorption or variable costing. These expenses are always treated as period costs and are charged against the current period’s revenue.

Chapter 6: Applying Excel p. 259

Provided Data
Selling price per unit \$50.00
Manufacturing costs:
Variable per unit produced:
Direct materials \$11.00
Direct labor \$6.00
Fixed manufacturing overhead per year \$1,20,000
Variable per unit sold \$4.00
Fixed per year \$70,000

Year 1 Year 2
Units in beginning inventory 0
Units produced during the year 10,000 6,000
Units sold during the year 8,000 8,000

Enter a formula into each of the shaded cells below
Review Exercise 6-1: Contrasting Variable and Absorption Costing
NOTE: Compute the requested information below which does not match the “Required” list in the text

Compute the Ending Inventory
Year 1 Year 2 Year 1 Year 2
Units in beginning inventory – Incorrect
Units produced during the year 10,000 6,000
Units sold during the year 8,000 8,000
Units in ending inventory Incorrect

Compute the Variable Costing Unit Product Cost
Year 1 Year 2 Year 1 Year 2
Direct materials \$11.00 \$11.00
Direct labor \$6.00 \$6.00
Variable costing unit product cost Incorrect Incorrect

Compute the Absorption Costing Unit Product Cost
Year 1 Year 2 Year 1 Year 2
Direct materials \$11.00 \$11.00
Direct labor \$6.00 \$6.00
Absorption costing unit product cost Incorrect Incorrect

Construct the Absorption Costing Income Statement
Year 1 Year 2 Year 1 Year 2
Sales Incorrect Incorrect
Cost of goods sold Incorrect Incorrect
Gross margin Incorrect Incorrect
Selling and administrative expenses Incorrect Incorrect
Net operating income Incorrect Incorrect

Construct the Variable Costing Income Statement
Year 1 Year 2 Year 1 Year 2
Sales
Variable expenses:
Variable cost of goods sold
Variable selling and administrative expenses Incorrect Incorrect
Contribution margin Incorrect Incorrect
Fixed expenses:
Fixed selling and administrative expenses Incorrect Incorrect
Net operating income Incorrect Incorrect

Exercise 6-2: 1, and 2 (p. 263)

1. 25 units in ending inventory × \$240 per unit fixed manufacturing overhead per unit = \$6,000

2. The variable costing income statement appears below:
Sales
Variable expenses:
Variable cost of goods sold Incorrect

Contribution margin Incorrect
Fixed expenses:
Fixed selling and administrative expenses Incorrect
Net operating income Incorrect

The difference in net operating income between variable and absorption costing can be explained by the deferral of fixed manufacturing overhead cost in inventory that has taken place under the absorption costing approach. Note from part (1) that \$6,000 of fixed manufacturing overhead cost has been deferred in inventory to the next period. Thus, net operating income under the absorption costing approach is \$6,000 higher than it is under variable costing.

Exercise 6-3: 1 only (p. 263)

1. Year 1 Year 2 Year 3
Beginning inventories 200 170 180
Ending inventories 170 180 220
Change in inventories
Incorrect Incorrect Incorrect
Fixed manufacturing overhead in beginning inventories

Fixed manufacturing overhead in ending inventories Incorrect Incorrect Incorrect

Fixed manufacturing overhead deferred in (released from) inventories Incorrect Incorrect Incorrect

Incorrect Incorrect Incorrect

Variable costing net operating income \$10,80,400 \$10,32,400 \$9,96,400
Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing
Incorrect Incorrect Incorrect

Absorption costing net operating income
Incorrect Incorrect Incorrect
Exercise 6-4: (p. 263)

Product Sales Units Sold Price per Unit Total Sales
Weedban: 15,000 \$6.00
Greengrow: 28,000 \$7.50
*Total Sales Incorrect

Variable Expenses
Weedban: 15,000 \$2.40
Greengrow: 28,000 \$5.25
**Total Variable Expenses Incorrect
Total
Company Weedban Greengrow
Sales* \$- \$- \$-
Variable expenses** \$- \$- \$-
Contribution margin Incorrect
Traceable fixed expenses Incorrect
Product line segment margin \$- \$- \$-
Common fixed expenses not traceable to products
Incorrect
Net operating income Incorrect

Exercise 6-5: 1, 2, and 3 (p. 264)

1. The companywide break-even point is computed as follows:
Traceable fixed expenses
Common fixed expenses
Overall CM ratio
Dollar sales for company to break even Incorrect

2. The break-even point for the North region is computed as follows:
Segment traceable fixed expenses
Segment CM ratio
Dollar sales for a segment to break even Incorrect

3. The break-even point for the South region is computed as follows:
Segment traceable fixed expenses
Segment CM ratio
Dollar sales for a segment to break even Incorrect

Exercise 6-9: 1, 2, and 3 (p. 265)

1a. Under variable costing, only the variable manufacturing costs are included in product costs.
Year 1 Year 2
Direct materials
Direct labor
Variable costing unit product cost
Incorrect Incorrect
1b. Year 1 Year 2
Sales
Variable expenses:
Variable cost of goods sold
Total variable expenses
Contribution margin
Fixed expenses: Incorrect Incorrect
Total fixed expenses
Net operating income (loss)
Incorrect Incorrect
2a. The unit product costs under absorption costing:
Year 1 Year 2
Direct materials
Direct labor
Absorption costing unit product cost
Incorrect Incorrect
2b. The absorption costing income statements appears below:
Sales
Cost of goods sold
Gross margin
Net operating income
Incorrect Incorrect
3. The net operating incomes are reconciled as follows:
Year 1 Year 2
Units in beginning inventory –
Units produced
Units sold
Units in ending inventory –
Incorrect
Year 1 Year 2
Fixed manufacturing overhead in ending inventory

Fixed manufacturing overhead in beginning inventory

Manufacturing overhead deferred in (released from) inventory

Incorrect Incorrect
Year 1 Year 2
Variable costing net operating income